EXAM-4-ACCT-101-Spring 201c doc (Compatibility Model Wrd Bernadette Jackson ne I

Question

EXAM-4-ACCT-101-Spring 201c doc (Compatibility Model Wrd Bernadette Jackson ne Insert Design Layout References Mailings Review View novaPDF Exam #4: Chapters 8, 9, 10, & 11 Calculation (65 points): 12. A Compary equipment was acquired at the bepinning of the year at a cost of $78,500 that has an residual value of $9,000 and an estimated useful life of 5 years a Determine the 1t and 20d year's depreciation expense using straighi-line method (10 points, calculation procehure cownts 6 points, filing the blarsk counts 4 points) Answers: Depreciation Expense at Year 1 Depreciation Expense at Year 2 b. Determine the 1s and 2ed year's depreciation expense using double-declining-balance method (10 points, the blank coonts 4 points) calculation procedure contrs ponts Aling the cownso Answers Depreciation Expense at Year 1 Depreciation Expense at Year 2 Calculation

Explanation / Answer

Depreciation under straight line method

= (Purchase cost – Salvage value) / Useful life

= ($78,500 - $9,000) / 5

= $13,900

So, Depreciation for first year = $13,900

And Depreciation for second year = $13,900

Depreciation rate under double declining balance method

= 1 / Useful life x 2

= 1 / 5 x 2

= 0.40 or 40%

Depreciation under double declining balance method

= Book value at the beginning of the year x Depreciation rate

Year 1

= $78,500 x 40%

= $ 31,400

Year 2

Written down value at the beginning of second year

= Book value at the beginning of first year – Depreciation for first year

= $78,500 - $ 31,400

= $ 47,100

So, Depreciation for second year

= $ 47,100 x 40%

= $ 18,840

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